francine: the big "ifs" powell says the recovery could drag on through 2021 as long as there is no second outbreak. astrazeneca -- boris johnson warns the country may not be free of the virus for some time to come. the bank of england -- today marks the first meeting of the governing party since the start of the coronavirus -- governing body since the start of the

coronavirus. good morning, everyone. this is "bloomberg surveillance." i am francine lacqua here in london. this is a picture of the markets. we are seeing a bit of a bid for the commodities markets. there is definitely a little bit of an upside when it comes to the price of oil. that is the one big one we are watching out for. we are also looking at the oil, first of all, at $31.14. europeanot gold up 1%, stocks gaining almost 2%. we will have more at your market action throughout the day. let's get to bloomberg first word news in new york city with ritika gupta. ritika: the u.k. warning of a long battle with the coronavirus. people returning to work and school as the economy gets back on its feet. on sunday"the sun" says johnson was returned to near normal in july.

astrazeneca will make 30 million doses of a coronavirus vaccine have 100ber and will million doses this year. the u.k. will be the first to have access to the medication if it is successful. it is being developed by oxford university. business secretary alec sharma says it will have 65 million pounds of funding. today marks the first meeting of the world health organization's governing body since the start of the coronavirus pandemic. europe and australia are likely to push for information into origins of the virus. the white house is repeatedly blaming beijing for the pandemic. and while way is accusing the u.s. of using private security up its ownef dominance of the tech industry. move up saysys the the global supply chain.

they report one semiconductor has stopped accepting orders from the chinese tech diet -- tech giant. global news, 24 hours a day, on air and @quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. francine? francine: ritika, thank you so much. now, don't bet against the american economy, that is according to fed chair jay powell. he says the u.s. economy will recover from the coronavirus pandemic, but it can take longer than expected, and dependent, of course, on the vaccine. chair powell: it may take a while, it may take a period of time. it may stretch through the end of next year. we really don't know. francine: joining us this morning's stephen king, senior economic visor at hsbc. stephen, there are so many unknowns. can we talk about a crisis shorter or longer, or is it the recovery that we focus on? stephen: i think it is a

positive issue about the long-term cost of the crisis, so it is not so much that there is u-shape be a v- or a recovery, it will be where we recover, and thinking about maybe the failure of companies to invest in lots of skills over the labor market. all of these kinds of things make it more difficult to return to normality. that is above and beyond the specific sector problems, for example, airlines, restaurants, and so on and so forth. i think it is a long-term story with, frankly, term confidences. the other issue, of course, how do countries relate to each other, during and after this crisis, particularly when you have this kind of heightened rhetoric coming through between the u.s. and china? and a sense that perhaps countries joining this crisis

are thinking about themselves rather than thinking about how they relate to each other and how the virus spreads across borders. francine: can you talk to me about these long-term consequences? i know it will impact or you believe it will impact supply chains, and there is the so-called scar to the economy. stephen: yes, so for the scarring perspective, this is the issue of output never returning to what it would be on in the absence of covid-19, and part of the scarring is associated with global supply chains, a lot more language coming through with, whether it is the u.s. or france or the u.k., about national champions in strategic industries, which is sort of code for saying we are better off bringing production back home rather than relying on fragile productions in other parts of the world. that is something that i think will be an important part of the rhetoric over the course of the next few quarters. and then beyond that, you have a situation where technology can

potentially change the role of global supply chains. often technology as a driver for investment to move to other parts of the world. but technology increasingly can be used to bring production back home, so you can replace workers elsewhere in the world with even cheaper roberts and -- robots and ai back home. they will see that opportunity in the years ahead. francine: stephen, what does that do, for example, for international relations, which has an impact on the economy? does the world change? stephen: it is pretty clear that the relationship between the u.s. and china -- it was already pretty bad. it has gotten a lot worse in the last few weeks. it is pretty clear also that congress, regardless of who is in the white house, could be hostile toward china, so these kinds of effects are likely to

build rather than go away. obviously, there is a huge amount of mistrust between the two countries. all of these things do not really help. i think there is also a longer-term story that was in place before covid-19, maybe an existing superpower, a rising superpower, effectively both wanting to have a big role on the world stage, and both of them sort of elbowing the other when out of the way. is athat does suggest world whereby countries elsewhere, they have to think about precisely who it is that they are loyal to in the years to come, before those kinds of decisions are made, the world becomes a lot less globalized than it has been in recent times. francine: how much less globalized will it become, stephen? and, again, what does that mean to inflation? is that the ultimate inflationary pressure? stephen: i wrote a book a few years back called "grave new

world," and i am guessing that i am quite worried that globalization is going to reverse and may -- i find it difficult to find it replaced in the years to come. on inflation, it is worth stressing if you have a globalized world, you may end up with higher import prices, in regard to how supply is allocated around the world, but at the same time, it may be that other pressures point in the opposite direction in terms of inflation, most obviously the fact that with the, you know, huge crisis around the world, you end up with much lower levels of demand. that is ultimately disinflationary rather than inflationary. francine: stephen, what do you do with all of this debt? are one ofll, if you the finance ministers, what you're really hoping as you pre- a bridge between a

virus world and a post virus world. with the bridge will allow you to do is go into hibernation for workers to be furloughed, and ultimately, when the virus is under control or gone away, you can sort these companies out, they can go back to something approaching normality. you have a strong rebound in economic activity. if that happens, of course, you can certainly grow your way out of debt. i use the denominator in your gdpto db -- in your debt to ratio rises, and that story becomes much more fabled. scarring.m here is if you have permanent losses of economic activity, it may be becomes less digestible, then you are left with a series of more difficult choices. currencies are too far to think about, but choices include high taxes, cutbacks in government spending, financial repression, possibly inflation, if you print enough money, and all of those

are possible solution to a much higher government debt problem. if you go back to, you know, previous periods of rapid increase in government debt, basically wartime, you find that all of those techniques, effectively, were used one way or the other in those war aftermaths, if. . you like francine: -- if you like. gary: great, stephen king with hsbc. this is bloomberg. ♪

francine: economics, finance,

politics. this is "bloomberg surveillance." i am francine lacqua here in london. now to the bloomberg business flash is ready to go debt. -- is ritika gupta. the biggest long-haul carrier trends as by 30%. it comes as the travel industry is in near hibernation due to the coronavirus pandemic. airlines are looking to reduce costs and cope with a downturn in demand. softbank is doubling the amount it says it plans to buy back. the companies will allow a purchase of as much as $4.7 billion. to thenounced changes board, including resignation of alibaba founder jack ma. the company plans to sell a significant portion of its stake in t-mobile. berkshire hathaway has sold off most of its taken goldman sachs.

company alsot's cuts its investment in jp morgan by 3%. boosting its bed and one bank come up with an increased stake in pnc. that is your bloomberg business flash, francine. francine: thank you. is examiningngland the slump caused by the pandemic. telegraph" the bank is examining unconventional policies. still with us, stephen king from hsbc. stephen, we were told that they cannot rule anything out. test would negative ra mean for the bank of england? stephen: it is funny, jay powell in the u.s. over the weekend essentially ruled out negative rates, saying it was a bad thing for the economy. obviously, the benefit of negative rates, effectively,

those banks are paying people to borrow, and if you want to try to get the economy going, that is one way to do it. the disadvantage come of course, is that anyone who has savings in the bank is being penalized every single month, every single year. moreover to the extent that banks themselves may find it more difficult to pass off the negative rates to positives. that may squeeze their profitability and a term limit the amount they are prepared to extend to the wider economy. so the debate on negative rates is tricky, and it is tricky for one obvious reason, which is that so long as cash exists and people are happy to use it one way or another, cash guarantees you a zero interest rate in nominal terms. so the more negative you go in terms of interest rates in banks on deposit, more of the cash warding you may begin to see, which of course means in turn the central bank begins to lose control, monetary policy. so there are some tricky issues out there with regards to

negative rates. to be fair, the ecb has used it already. i think it is used to a degree in japan. but i think it is, you know, some limited degree of success, and in this situation, i think it is still unclear whether the bank of england would achieve a huge amount from using negative rates. francine: what could they do, if you actually look at, you know, central banks around the world, it seems like the bank of england maybe works closer because of the set up with treasury. the u.k. so far has been able economicnow, stump the slowdown somewhat or at least make companies safer than in other parts of the world. stephen: it comes from the treasury rather than the bank of england. the rates themselves have made a contribution to this. you come back to this idea of huge fiscal stimulus, increases in government debt, what you're basically saying is the companies, you know, stay in business, we will support you during these difficult times. you can reopen when we begin to

stall out, you know, a little later, into next year. but as far as monetary policies go, i think ultimately the bigger effects are likely to come through either from the central banks running into by government debt, so keeping yields very low, and giving the green light for the government to borrow increasingly large amounts without causing difficulties in adjustability. in the bond market. also, because chairman jay powell, as is the case over the weekend, central banks can buy a whole range of financial assets if they have to, so you can pump large amounts of money into the economy to make sure there are no shortage of dollars sterling, or whatever may be the case. what you see with capital markets, the more distorted capital markets come, the less strong are the signals within capital markers, and that allocationpoorer of capital, but central banks

may regard that as a price that is worth paying to make sure the economy in the near term is on appropriate life support. francine: stephen, when you look at europe, how turkey will be for the bl -- how tricky will it be for the block to stay together? stephen: that is a question you could've asked over the last 20 years. [laughs] to be fair, most of the time, it has stayed together, through, you know, even unusually difficult times, like, for example, the greek financial crisis. i think it is worth addressing currently there are huge pressures on europe. one is the free movement of people being across borders understandably called into question as a consequence of covid-19, and separately, the issue of whether you regard this virus as a sort of pan-european or pan-eurozone problem, in which case you need a pan- eurozone solution. in the current situation, there is no proper

pan-eurozone solution. so you're back to having a monetary policy at the euro level and a fiscal policy, divided two national entities, which causes itself considerable difficulties. what you know ho have is a standof, moving to include france, italy, spain, and so on, and the others who are very much against it, who will be on the sort of hook for all the excess bills that come through as a consequent, germany, austria, the netherlands, finland. this possibly could be resolved. it depends on what happens with covid-19 and that pressures that come from it. the one result is moving to a closer fiscal union, and the other, which i think is much more worrying for europe, of course, is the kind of pressures we saw with brexit begin to emerge in other countries, who suddenly think that perhaps europe is not working for them after all. and the one that i think is most

liable, in the short term at least, is probably italy. francine: and what does happen to italy? do they need a bailout out the end of this? stephen: at the moment, they think that the situation is not great, obviously, government debt is rising very quickly, and they have not got access to a printing press, so that the nymex do not look particularly good. you would hope that, you know, within a year or so, with the economy approaching normality, even the debt level itself has risen for shared gdp, and it then begins to stabilize, coming down to a certain degree. that would be a very good thing for italy. and italy might also point out, reasonably, that japan, for example, has much higher levels of government debt, and it has no difficulty in serving it, so you have the advantage that all countries have today, that interest late themselves are much lower than they used to be. the cost of servicing that is also lower. so you can probably live with a higher level of government debt than previously. but if it is the case that the

economy cannot really cover, if debt levels continue to rise, the cost of bailout continues to accelerate, then the market might begin to question how sustainable the fiscal situation in italy is, without some additional help coming through from elsewhere in europe. francine: great. stephen king, thank you as always, senior economic advisor at hsbc. coming up, we will tell you what to watch for this week. that is coming up next, and this is bloomberg. ♪

francine: you are watching "bloomberg surveillance." i am francine lacqua here in london. tomorrow, the fed chair, jay powell, and steven mnuchin testified before the senate banking committee. staying in the u.s. come on wednesday, we will get meetings from the april meeting, thursday, the ecb publishes accounts of the latest monetary policy meeting, and then japan, prime minister shinzo abe is expected to make a decision whether to end the status of the virus, including in tokyo. on friday, the national people's -- following coronavirus delays. here is what the markets are looking at, a lot of the focus

is on gold. a lot of the focus also in terms of what we are seeing in oil. stocks are climbing in europe. investors are finding encouragement, as a sign that businesses are opening across major economies. commodities, currencies are actually rising. gold actually trading the highest in seven years. pound heading for a sixth session of decline after a bank of england said the central bank is more urgently examining unconventional monetary policy measures, including negative rates. coming up, a prolonged disruption can lead to a recession of 12 to 18 months or longer. we will also discuss how businesses will adjust to the new normal. that is coming up next, and this is bloomberg. ♪ ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's get to first word news in new york city with ritika gupta.

ritika: u.s. economic recovery could drag on till next year, according to jerome powell. he made the comment in an interview with cbs, saying the recovery hinged on the arrival of a vaccine. he added the central bank has not exhausted its options and supporting the economy. above $30 an throu barrel for the first time in two months. the number of u.s. drilling rates fell for a ninth week to levels not seen in more than a decade. the american cuts come on top of almost 10 million barrels a day of curbs from opec and its allies. the economy fell into a toession that is only likely deepen as households and companies cut production and hiring. see an over 20% traction for the second quarter. the family feud of the billionaire berkeley brothers

has stepped up again. brothers. a room in the ritz was bugged. he claims have allowed other affect of the family to to the sale of a hotel. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, ritika gupta. this is bloomberg. francine: how can businesses adjust to in your reality? it is said a prolonged disruption can lead to recession, 18 months or longer. he warned that disruption as usual is likely to be the name of the game for the next few month. i'm delighted to be joined by the global vice chair at alixpartners. you are an expert when it comes to turning around companies. how ugly will this turnaround season be?

how many companies will be on ?he think of bankruptcy here crisis,is an acute shorter than other crises in the past. but it is very acute. there are some sectors that are particularly hit by it. obviously energy. they have double heat from the price of oil, but also by the fact that the consumption of oil has been dropping to 1% levels. aspect hithe other is leisure, travel, entertainment come and in general hospitality. it will take a bit of time before they will get back to normal. in the meantime, there has been a lot of liquidity crisis, and more companies have been looking

at fueling the balance sheet with loans to bilaterals. has been suffering a lot, and we have seen in that sector significant debt accumulating. -- and lastly i will mention the retail. particularly the non-growth -nonfood retail. all these sectors have been quickly with liquidity and avoiding the short-term crisis, but some had to go into bankruptcy, and some will -- if the crisis will persist through the end of the -- certainly there will be a very significant use of protection two-way

weigh the crisis. see ane: are we going to solvency crisis in a lot of cases? stefano: inevitably there will be also some of it, or at least there will be the use of theection to make sure that weather and will be solved through some reduction of liabilities. am referring, for example, to retail. i am referring to some of the commitment that need to be lowered or reduced. that are also some sectors profit from it clearly that have some part of health care.

technology, particularly some sectors connected to the conductivity. telecom, also some payment system, and some customer goods on the others, particularly ones that have been moving to e-commerce early on and are profiting from it. this crisis is certainly not a crisis for everybody. for some very acute sectors in particular. francine: first of all, you have a lot of government support in terms of schemes and loans, and i don't know whether that will prop up companies. is there a danger the healthy companies go bust, or is it something that has been brought on by the crisis? yes, there is this risk, because, as i said, because it has been so acute,

for the ones that did not have a strong balance sheet, no matter how profitable the company was, there could be some risk of insolvency or at least a risk of liquidity. -- i wouldws is that say companies and also banks, are entering the crisis with a much better balance sheet. at the same time, the government is entering this crisis with a worse balance sheet because of the crisis. what is certain is at the end of the crisis, both governments and companies will have more debt. will that be sustainable for everybody? certainly not. that will increase the risk of beault, which will concentrated in certain areas in certain sectors.

this depends off on the furloughs, how long they last and everything. is september too short a time frame? let's focus on the assets. do you worry that without an extension of the government from some of the help that companies receive that we are in dangerous territory? stefano: the good news is that almost all governments have been pumping a lot of liquidity into the system, starting from the u.s. but also the europeans, not to talk

has been critically reduced. it is very hard for everybody -- to what extent and to what -- and when exactly the crisis will be considered basically solved. but it is realistic when you see the recovery both in terms of production -- if you look at china, it is remarkable. and asia in general, actually, it is remarkable how the recovery has been fast. the capacity of human beings to adapt and organizations to adapt has been really remarkable. we can see what is happening in europe at the moment, there is clearly a lot of incentive for the u.s. to recover quickly. be aexpect september to turning point progressively, and the big unknown is that this w shaped rather

than b -- rather than v shaped. francine: thank you so much for joining us. stefan no aversa -- stefano aversa is one of the busiest men given what is going well and -- given what is going on with companies. there will be changes effective from august of this year as part of the index review, so we are getting a lot more news on exec lee that entails. we were expecting something of the sort. the hang seng shares and secondary listings. this is one of the indices that could look vastly different come august 2020, so just a couple of months from now. we will have plenty more on the hang seng. stay with "surveillance." ryanair is tapping a 600 million pound loan, backed by the u.k. that after the chief executive

criticized companies elsewhere. michael o'leary is coming up next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." ryanair boosts his liquidity with a 600 million pound loan, backed by the u.k. government. while chief executive michael o'leary tells bloomberg the airline resumes flying in july, the carrier will reduce passenger numbers by half over the next year. there is michael o'leary. michael: we are supportive of those state aids that are made available to companies or competitors equally, and we

qualify for the u.k. loan scheme because we are at the largest hasn't are in the u.k., and we credit rating. what we are opposed to is the illegal state aid that air france will receive, about 10 billion, lufthansa 12 billion, and alitalia has been nationalized and will receive 3 billion. without any corresponding support to the other airlines operating in that market. the french are refunding french -- what we are calling for is an end to those in illegal discriminatory state aids, and confining the payroll supports to government loans that are made available to all airlines. >> you have been critical of those kinds of schemes. are you going to be looking to other governments for support? will you be looking at payroll schemes, such as from spain or

the other governments? the aid we qualify for from other countries. even ryanair would not survive without that support. we are asking the question -- we can survive for many months if not years on payroll support. we don't need illegal state aid on top of that. we are asking the question why does air france, on top of support schemes, need additional skate aid -- state aid? why does france need 12 million when there payroll is being paid swiss austrian-german government? they will use that as we emerge through the covid-19 crisis to engage in massive below cost sellings. -- orore competition lufthansa will simply use it to buy up all the rest of

competitors. we have asked the question -- whydly -- we welcome is it that the german and the obey byovernment must the rules, but they are the biggest state aid dopers and all of this? but others like the irish, the spanish, the central european government come are not bailing out their airlines because they don't need those bailouts? >> one of the argument out of berlin is that they need to ensure there is a carrier that is going to be able to cater to younger people and also haul flights that you don't markets thaterve, you don't necessarily serve. if there would be no lift anza, would ryanair serve those markets? haul will takeng longer to recover, but v.a. and liberia all fly long haul but

they don't take state aid. if the german government wants to give 12 billion to lift anza, it also -- to lift anza, the same state air to the others operating in germany, not because we want state aid, but limiting the amount of state a -- twoes to lift anza lufthansa. refunds, left anza does not even need the money. they have already been allowed to buy up air berlin, all the other domestic competitors. longssively distort the haul flows into europe for the next number of years because they can undercut ba, iberia come at all the others that are not receiving illegal state aid. it is a massive distortion of the competition between europe,

and it is something that the european union should not be allowed to go ahead. francine: that was michael o'leary, the chief executive ryanair -- of ryanair. itsing comes under fire for initial handling of the outbreak. the world health organization. that is coming up next, and this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's discuss the latest on the coronavirus response. the decision-making body of the w.h.o., the world health assembly, meets today for the first time since the pandemic took hold. getting criticism for its initial handling of the outbreak. the u.s. is pushing for a probe into the origins of the outbreak. thank you for joining us. that start with whether the virus was man-made. is there evidence of that and how would change -- how would that change the meeting? rik: all the evidence we have

so far point out that this is a coronavirus, of the family of coronavirus circulating in the animal world, and the population of bats. what we don't know so far is what was the intermediate tocies that allows the virus cross from bats to humans, because in most previous cases we knew there was an immediate -- bit direct -- direct contact was bad. there is investigation ongoing into trying to find that, and , a number of scientists point out that this is a virus that was circulating in the animal world. francine: give us a sense, first of all, of what will happen today if the u.s. blames china for a mishandling of the crisis. is there evidence of that?

how does the w.h.o. investigate and get to the bottom of exactly what happened? difficult -- tarik: it is difficult to speculate. normally these meetings are much longer and discuss a variety of health issues. this time we will have only one discussing covid-19 and some procedural matters with only two days assembly, and member states will have a possibility to address the world health assembly and make their points. so from our side, we are always reviewing how the w.h.o. is functioning, and we have reviews. right now, we are looking leadersfrom the world

what they have to say. francine: when you look at some of the things that each country is doing individually, in reopening, he is getting it right? does the w.h.o. have a template on how we kind of feel our way through reopening the economy? do people have to wear masks? why don't we have a uniform way of how you reopen an economy while keeping people safe? tarik: first of all, the situation is not the same in each country, so every country has its own specific -- its own specificities. it is may be in a different stage of the outbreak. the w.h.o. should set guidance on how we should ease restrictions, if a country decides to get out of these restrictive measures that have been put in place in many places. so one of them is to really try to make sure that -- second is

to have a health system that is strong enough and prepared enough to quickly identify people who are sick, treat them, isolate them, and look for context. we also have to look into vulnerable population -- the iner population -- facilities that are providing care for those elderly, and we have seen that there was a lot of transmission in those places. we have to look into work lace. how we can ensure that protective measures are being put in place in the workplace. and also we really need to explain to the population why we are changing the restriction measures, and what is to be expected. because full engagement of the population in any given place is crucial. measures may actually be successful. francine: what do we know of

antibody testing? has the w.h.o. identified a couple of them that are valuable but also that work? because at the moment there are questions about which ones work, which ones don't. there are very different results depending on the one that you take. far, the w.h.o. is recommending pcr testing so that to understand who has the virus. when it comes to antibody testing, there are several of them being developed. from our position, each one of these tests should be verified individually and before recommendation. but it is important to have antibody tests because that is where you have clear information of how many people have actually been carrying the virus in the past. there are some studies that are being carried on, and for example, some pre-lim and area studies have shown that really a small percentage of the population has antibodies, and

the majority of people are susceptible to being infected. that is something he we have to take into account when it comes to the opening of activities and the economy that we were just talking about. francine: thank you so much for all of the update. for the worldson health organization. so many questions. we will have him back on very soon to go over some of the other questions. this is the picture for your markets. a lot of the markets are looking at reopening the economies. i guess they are feeling a bit better about things to come. if you look at european stocks, they are getting 2%. this is bloomberg. ♪ w?w?uhió'ñó

francine: the big if.

jay powell says the recovery could drag on until 2021 as long as there is no second outbreak. astrazeneca aims to get 30 million vaccine doses ready for the u.k. by september. boris johnson warns that the country may not be free of the virus for some time to come. the bank of england mulls negative rates. and today marks the first meeting of the world health organization's governing body since the start of the coronavirus pandemic. china is said to be challenged on his handling of the outbreak. -- on its handling of the outbreak. good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua, here in london. tom keene is in new york. a lot of the focus is on markets and businesses reopening. our -- i am looking forward to hearing from the w.h.o. they have not done this before. video conference. sparks could fly. tom: no question about it, the chinese will